3/28/2012

The geopolitical complexity in Greece

BBH analysts point out the political and economic issues that are faced when it comes to the structural reforms in Greece, as the country is the no.1 arms importer from Germany and no.3 from France. These arms dealing relationships explain why creditor countries don’t insist much on Greece’s defense budget cutting.

“If, over the past decade Greece would have spent only the euro zone average of 1.7% of GDP on defense, rather than 4%, it would have saved a little more than 50% of GDP or roughly 150 bln euros--more than the second aid package”, wrote Marc Chandler, global head of currency strategy at BBH, pointing also to the €900 M extra spending in defense in 2010, while social spending got cut by €1.9 bn.

BBH analysts regard the export-oriented models in Europe as one of the casualties of the crisis as the consumer countries no longer have the ability to keep up with creditors’ production. Creditor nations “were essentially engaged in producer financing”.

Mounting to those issues is the fact that Greece is a NATO member, with vast geostrategic assets that could be used against Europe and US interest, having already conceded the port of Piraeus to China for 35 years. Russia could be next.